Dividend taxation and tax system in Ukraine
To fully grasp dividend taxation in Ukraine, one must be knowledgeable about the local tax system, adhere carefully to reporting requirements, and adopt a well-thought-out strategy for tax planning. Regardless of whether your business is classified as a resident or non-resident entity, it is crucial to understand the tax obligations and benefits associated with dividend distributions in Ukraine. This understanding is vital for ensuring compliance and enhancing your tax situation. This guide outlines the dividend tax environment in Ukraine, including tax rates, filing obligations, and the resources available to assist you in effectively managing your dividend taxation.
Dividend tax system
In Ukraine, the taxation of dividends is determined by the status of the payer. Dividends distributed by companies that are liable for corporate income tax (CIT) are taxed at a rate of 5%. For dividends from entities that do not pay CIT or from non-resident companies, the tax rate is 9%. Dividends that are not categorized as ‘ordinary’ incur the standard personal income tax (PIT) rate of 18%. Furthermore, all dividend income is subject to an additional 1.5% military tax.
Tax exempt
Dividends from companies that pay CIT are subject to a favorable tax rate of 5%. Some dividends may be exempt from advance corporate tax (ACT) if they are distributed by holding companies from dividend income they receive from their subsidiaries. Additionally, dividends derived from tax-exempt profits are also free from ACT. Dividends given to individuals might not incur a tax if they are paid out no more than once every two years.
Tax return
Residents and non-residents receiving Ukrainian-sourced dividends are required to report dividend income in their annual tax return. The tax return encompasses all taxable income, including dividends, and determines the taxes owed. Those who distribute dividends, such as employers and entities, are responsible for withholding taxes at the point of payment. Taxpayers need to adhere to filing deadlines and settle any unpaid taxes to prevent incurring penalties.
Tax compliance and reporting obligations
Proper management of dividend tax obligations is essential to prevent penalties and maintain efficient business operations. It is important for companies to comply with various reporting standards, which include precise withholding, prompt tax payments, and comprehensive documentation. Adhering to both local and international tax regulations is crucial to prevent conflicts with tax authorities and sustain your business’s financial stability.
Our services aim to help your business manage these responsibilities, guaranteeing that all submissions are correct, punctual, and completely adhere to the regulations set by relevant tax authorities.
Dividend tax for non-residents
Individuals who are not residents and receive dividends from sources in Ukraine typically face a withholding tax of 15%, unless this rate is lowered by a relevant double tax treaty. This withholding tax is applied to dividends from companies that pay corporate income tax at the standard rate. Non-residents might take advantage of reduced tax rates through international tax treaties, potentially decreasing or removing the withholding tax on dividends. Additionally, non-residents must pay a 1.5% military tax on the dividends they receive.
Managing dividend tax risks
It is crucial to handle dividend tax risks to ensure your business’s financial stability and adherence to regulations. These risks can stem from alterations in tax legislation, international transactions, and intricate global tax agreements. Inadequate management of these risks may result in unforeseen liabilities and fines.
To reduce these risks, organizations ought to consistently assess their tax practices, keep up-to-date with changes in legislation, and guarantee adherence to all applicable regulations. Establishing a strong tax risk management strategy that involves comprehensive documentation and proactive modifications to the business structure can aid in preventing expensive problems.
We help your business recognize and handle dividend tax risks, ensuring that you remain compliant and protected in an ever-changing tax landscape.
Dividend tax services
Our group of specialists offers a wide array of dividend taxation services designed to address the specific requirements of businesses connected to Ukraine. We support tax compliance, strategic tax planning, navigating double taxation agreements, and reducing tax obligations. Our services encompass calculating and remitting dividend withholding taxes, representing clients in interactions with tax authorities, and providing continuous advisory assistance to ensure your business adheres to Ukraine’s dividend tax regulations. Additionally, we offer advice on leveraging tax incentives, handling cross-border dividend transactions, and refining your overall tax strategy to align with your business objectives.
Contact us
If you require support in fulfilling Ukraine’s dividend tax requirements while improving your tax circumstances, we are available to assist you. Get in touch with us to learn more about our services or to arrange a consultation with one of our tax experts. We can help you navigate the intricacies of dividend taxation in Ukraine, enabling you to concentrate on what is most important—growing your business.
Disclaimer
Tax laws and regulations frequently change and can differ depending on personal circumstances. The information offered here serves as general guidance and may not represent the latest updates. It is strongly advised to seek advice from a qualified tax professional for tailored and current recommendations related to your specific situation.